374 Explaining Business Support for Regional Trade Agreements
into the North American market. In free trade agreements, rules of origin
requirements are used to determine what goods were actually produced in the
member countries and therefore qualify for preferential treatment. In negotiations
over NAFTA, U.S. auto firms have insisted on 50 percent rules of origin agreements,
which gives preferential treatment to firms already established in North America.
The discriminatory measures embedded in regional trade agreements contrast
with the multilateralism advocated by GATT.... To the extent that NAFTA
institutionalizes preferential treatment for U.S. firms and discriminates against
foreign competitors, it can hardly be seen as compatible with the broad principles
of GATT....
In fact, NAFTA brought together a coalition of corporate supporters advocating
both discriminatory treatment against foreign investors and reduced tariff barriers.
On the one hand, foreign direct investors in autos and electronics advocated tough
rules of origin requirements that privileged existing market players and penalized
late entrants.... On the other hand, multilateralists represented by banks, U.S.
exporters, and retailers supported NAFTA for its liberalized trade provisions.
These corporate coalitions came together to lobby for NAFTA against
importcompeting industries who stood to lose market share if trade was liberalized.
Opponents of NAFTA included labor-intensive industries producing footwear,
glassware, luggage, brooms, and ceramics, and agricultural producers of asparagus,
avocados, canned tomatoes, citrus, sugar and sugar beets. Other powerful critics
of NAFTA included labor unions, religious organizations, and consumer and
environmental interest groups that feared the consequences of liberalized trade
and investment for U.S. labor, Mexican workers, and the environment.
The battle over NAFTA suggested that multilateralists faced stiff opposition in
securing a regional trade agreement that was compatible with the multilateralism
of GATT. This was true for two reasons. First, corporate supporters of NAFTA
included an uneasy alliance of foreign direct investors, multinational banks, and
exporters, each of which supported the agreement for different reasons. These
interests came together to lobby for NAFTA, but they have often been on opposing
sides of the free trade debate in other, nonregional contexts. Second, NAFTA
became a lightning rod for popular discontent, influenced by the legacy of
corporatelabor battles of the 1980s that resulted in considerable union concessions
in autos, steel, and textiles. The concessions were often won as a result of corporate
flight or threats to close down plants in lieu of reduced wages and/or benefits.
MULTILATERALISM, REGIONALISM, AND PROTECTIONISM IN
THE WAKE OF THE NORTH AMERICAN FREE TRADE AGREEMENT
There are several noticeable trends that have affected trade politics from the late
1970s to the present. The first has been a defection of some multinational firms
from the free trade coalition that previously dominated U.S. trade policy. Firms
were more likely to defect if they faced the following conditions: increased import
competition leading to loss of market share in the United States and elsewhere,
reliance on foreign direct investment geared toward regional markets, and low